With the advent of powerful immunosuppression drugs, acute allograft rejection is rare now in the clinic and the short-term transplant survival hs been excellent. However, long-term transplant survival is also rare and most allografts are continuously lost to rejection as time progresses. It is undeniable that there remain significant barriers to long-term graft acceptance. We recently discovered that Foxp3+ Tregs, a cell type dedicated to immune regulation and critically involved in transplant tolerance, can be driven to exhaustion by a costimulatory molecule OX40. The exhausted Tregs readily lose their regulatory functions, acquire typical exhaustion markers such as PD-1, Tim-3, and KLRG1, and become susceptible to apoptosis. We identified a new transcription factor Baft3 through transcriptional profiling and believed to be involved in Treg exhaustion. Batf3 is strongly induced by OX40 and closely associated with the development of exhausted Tregs. We provide compelling data that Baft3 physically binds to the promoter region of Foxp3 and actively suppresses Foxp3 expression. Based on this, we hypothesized that Treg exhaustion is a preciously unrecognized fate of Foxp3+ Tregs and that Treg exhaustion is transcriptionally regulated in which Batf3 plays a central role. Understanding the mechanisms of Batf3 induction by OX40 and how Batf3 drives Tregs to exhaustion is the central focus of this proposal. We believe that the proposed studies will unravel novel mechanisms of tolerance resistance and may lead to the development of new therapies in the induction of transplant tolerance. In addition, findings from these studies will have broad impact on other immune-mediated diseases, such as cancer therapies, autoimmunity, and vaccination development.